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Home Depot Stores Accused of Deceptive Credit Card Practices

February 7, 2004

These days there are few stores where consumers can make purchases without being asked if they would like to open up a store credit card. A store offers its own card in hopes of increasing the number of large purchases, and so the store can share in the interest generated by purchases on credit. Stores often try to attract people to these cards by advertising zero interest rates or low interest rates as promotions.

Home Depot, the world's largest home improvement store chain, offered its store Home Depot credit card customers a promotion with no interest and deferred payments on large purchases. The Home Depot credit card generated around 23% of the company's sales in the 2002 fiscal year according to regulatory filings. Three point three million customers opened Home Depot credit accounts in 2002, bringing the total number of Home Depot card carriers to 12 million.

Home Depot is now being sued over the credit card promotion, forcing all consumers to question what type of "deal" they are getting when signing up for retail credit cards. According to lawsuits filed against Home Depot for deceptive business practices, customers were attracted to the mega store promotion and made a large purchase with no interest under the belief that no interest would be accrued so long as the balance was paid prior to the end of the promotion.

Since smaller purchases made with the Home Depot card were subject to accruing interest and monthly payments, lawsuits were filed alleging that instead of applying the monthly payments to reducing high interest revolving balances, Home Depot applied the payments towards reducing the interest free balances. The interest on the non-promotional covered balances ran as high as 21%. Home Depot customers who believed they would receive interest free credit were accruing significant interest, lawsuit charges.

The Home Depot lawsuits may reveal other questionable credit card practices and force consumers to be more aware of "hidden terms" when responding to promotional offers or opening up new credit card accounts. If, as the suit claims, The Home Depot never disclosed the terms of interest to its customers, then the company is guilty of illegal practices. Consumers who suffered losses due to such a fraud are entitled to recover all associated funds, which may include punitive damages.

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